Farm Ireland

Saturday 24 February 2018

'Loan star' state? Irish banks must drop facade

Stock image: Reuters
Stock image: Reuters

I sometimes think 'recovery Ireland' is like one of those fit-up, façade towns used in the making of old Western films. Everything looks real until you open the door of the saloon and you walk back into the desert. Many of the institutions in 'recovery Ireland' are like that, and none more so than the banks. Open the door of your local bank and you're walking into the desert. After €64bn of our money, they are still not functioning but have all the optics of operating financial institutions. They talk about being open for business, about being brave and ready for the stock market, but try getting a loan from them.

In my role as a property scribe, I talk to auctioneers up and down the country about all sorts of things, from Brexit to bunions, and of course we talk about banks and the money supply. They all tell me the same thing: it is impossible to get loans of substance from banks and most of the land changing hands at auction and by private treaty since the crash is being bought with cash. Farmers and other landowners who made money in the boom and didn't waste it on bank shares are the primary customers for farmland.

Anyone approaching mainstream financial institutions to borrow for land purchase, if they are lucky, will get 30 to 40pc of the value of what they want to buy. A dairy farmer looking to bid on the adjoining 50ac at €8,000/ac might get €3,000/ac from the bank. He or she has to come up with the remaining €250,000 in cold cash. There aren't many people in any business, least of all farming, who could lay hands on this amount of money.

Those who manage to prise a loan from the main lending institutions have to provide a level of security and collateral that isn't far short of a ransom demand. A friend of mine builds houses on a small scale and also has a number of rental properties. Recently he tried to borrow €150,000 to finish the building of a home but the bank wanted the deeds of four houses before they would release the money.

One auctioneer lays the blame for the housing and homelessness crises fairly and squarely at the doors of the banks: they swallowed every available taxpayer's euro to bail them out but there is nothing coming back. He claims to know three developers in the south of the country who have recently started small housing developments with the aid of private investors; they cannot get a bob from the banks. If builders have no access to money, no houses will be built; if farmers can't buy land, the industry will stagnate.

In case we don't know it, austerity is alive and well and is set to continue for many a year to come. Our bailout of the banks and our vicious programme of austerity has led to a modest and fragile stabilisation that is nothing but a replica of Dodge City, a fit-up town hiding a story of appeasement, acquiescence and sell-out.

Recently we saw Enda Kenny and Michael Noonan doing their laps of honour accepting national and international plaudits for saving us from the abyss. They didn't save us: they saved the international financial system.

Ours was the finger in the dam in 2011. If we had told the ECB, the IMF and the European Commission that we were not asking our people to pick up the tab for the unbridled selfishness of the high financiers and their profligate clients, there could be a different story to be told around Europe and the world today.

Also Read

We were the ones who prevented the rotten edifice from falling and, of course, we are celebrated internationally as heroes. "If Ireland can do it, you all can." And so the ECB, the European Commission and the IMF salute us and flaunt us as the poster boys and girls of austerity and recovery, waving our pathetic example in the face of every country that shows any doubt about what is 'the right thing to do'.

When Jean-Claude Trichet, the then head of the ECB, told Brian Lenihan in 2008 that he must not let a European bank fail, that was the beginning of our sacrifice on the altar of international finance - where we laid ourselves down willingly and without a word.

They say that history is written by the victors and if the history of these times is sponsored by the likes of Goldman Sachs, then Lenihan, Kenny and Noonan will be hailed as heroes.

And in that scheme of things, they played central roles saving a system of international finance that is predicated on transferring the wealth of the many to the few, of making the top 1pc of the world incredibly rich - an objective that can only be achieved and sustained by impoverishing the rest.

As a lasting consequence, the vast majority of us are going to be poorer. The more fortunate will have zero-contract employment, huge educational debts, second-rate healthcare, exorbitant rents and no provision for old age. The less fortunate will find themselves sleeping in doorways or crammed into leaky boats crossing the Mediterranean hoping to become one of us.

Send letters to: Farming Independent, Independent House, Talbot street, Dublin 1 or email:

Look to local banks and Credit Unions

At the recent AGM of Irish Rural Link, banks, banking and alternative financing for small businesses were discussed. Among the speakers was Harald Felzen of Sparkassen bank in Germany.

This is a locally based savings and loan bank with 14,451 branches throughout the country, using local savings to service local needs. Thanks to its focus on local money and needs, it was the only German bank to come through the crisis unscathed and far from closing local branches (like all our institutions are doing) it believes its local nature is its salvation.

At the same conference, Con O'Brien of Mitchelstown Credit Union pointed out that while all indigenous Irish banks based in the Republic failed during the crash, only 1pc of Credit Unions failed. At present, after all our bailout money, AIB is said to be worth about €9bn, BoI €8bn - but the Credit Unions are worth €28bn.

Meanwhile, they are being set upon by the Central Bank and by Government and excluded from the mortgage market, from the business loan market and for the most part from the farm loan market. They are left to encourage members to borrow for products such as new cars, with some provision for education or home improvements. Something is wrong somewhere.

Indo Farming

More in Rural Life